Rajasthan High Court - Jodhpur
Banswara Syntex Ltd vs U.O.I.& Ors on 10 January, 2011
Bench: Arun Mishra, Prakash Tatia
1
IN THE HIGH COURT OF JUDICATURE FOR RAJASTHAN AT
JODHPUR
::
JUDGMENT
Banswara Syntex Ltd. Vs. UOI & Ors.
D.B. Central Excise Appeal No.1/2011
Date of judgment :: 10.1.2011
PRESENT
HON'BLE THE CHIEF JUSTICE SH. ARUN MISHRA
HON'BLE JUSTICE SH. PRAKASH TATIA.
REPORTABLE
Mr. Sanjeev Johari, for the appellant.
<><><>
[Per Hon'ble Tatia, J.]
The appellant has preferred this Excise Appeal under Section 35-G of the Central Excise Act, 1944 to challenge the order dated 24.8.2010 (Ex.P/12), 7.10.2004/30.9.2004 (Ex.P/9) and 30.7.2003 (Ex.P/5) and prayed for upholding that the liability determination order dated 5.10.1999 (Ex.P/2) merged into order dated 30.7.2003 (Ex.P/5) passed by the respondent no.3 - the adjudicating authority under Section 11A of the Central Excise Act, 1944 and not challenging the said order dated 5.10.1999 is not fatal and cannot come in the way of the appellant - assessee.
Brief facts of the case are that appellant is a company registered under the provisions of the Companies Act, 1956 and controversy pertains to the processing unit of the appellant company which was earlier known as "Banswara Textile Mills Ltd." which now stands amalgamated in the appellant-company "Banswara Syntex Ltd." as amalgamated 2 under the provisions of the Companies Act, 1956 w.e.f. order dated 28.9.2006 passed by the Company Judge of this court.
The controversy arose with reference to the legality of levy of Central Excise Duty on the "Galleries" attached with the "Hot Air Stenter" under the rules known as Hot Air Independent Textile Processors Annual Capacity Determination Rules, 1998 (hereinafter referred to as the Rules of 1998 for short). The appellant first faced the order dated 5.10.1999 passed by the Commissioner, Central Excise, Jaipur-II whereby after taking into consideration the galleries while computing the annual capacity of production in terms of value, it has been held by the assessing authority that assessee is required to pay duty @ Rs.1.50 lac per chamber per month resulting into total duty per month Rs.22,20,000/- w.e.f. 8.9.1999. The petitioner against this liability paid Rs.21,91,500/- during the period 1.11.1999 to 29.2.2000 and there was short payment of only Rs.1,14,000/-. The petitioner challenged the said order dated 5.10.1999 by preferring SBWP No.3080/1999 before this Court.
It appears that in view of the finality of the order dated 5.10.1999, after withdrawal of the writ petition of the appellant, a demand notice was issued against the appellant by the respondent no.4 - Superintendent, Central Excise Range, Banswara. By this demand notice dated 3 13.11.2000, the appellant was asked to show cause as to why the central excise duty to the extent of Rs.1,14,000/- should not be demanded and recovered from the appellant subject to the final decision of the writ petition no.3080/1999, which was pending at that time. The appellant-assessee submitted reply the above said show cause notice dated 3.11.2000 on 21.2.2001 and took the plea that larger bench of 3 members of the tribunal in the case of Sangam Processors Ltd, Bhilwara reported in 2001 (42) RLT 49 has held that under the Rules of 1998 "galleries" are not to be included in "Hot Air Chamber" for finding out the production capacity. The respondent no.3- adjudicating authority accepted the plea of the appellant vide order dated 30.7.2003 and dropped the proceedings initiated vide demand - cum - show cause notice dated 3rd Nov., 2000. The copy of this order dated 30.7.2003 is Ex.P/5.
It will be worthwhile to mention here that before above order dated 30.7.2003 was passed to drop the recovery proceedings, the petitioner withdrew that writ petition on 3rd July, 2002 with liberty to challenge the order of the tribunal. The operative part of the order passed by this Court in petitioner's said writ petition no.3080/1999 is as under: -
"Learned counsel seeks permission to withdraw the instant writ petition. Hence, the writ petition is dismissed as withdrawn. The petitioner is given liberty to challenge the order of the CEGAT if the 4 necessity so arise. Since the writ petition was pending before this court the appropriate authority will consider this fact favourably to the petitioner while considering the application for condonation of delay in filing the appeal."
Admittedly, the appellant did not chose to challenge the said impugned order dated 5.10.1999 before the CEGAT in spite of seeking permission from the Court in appellant's own writ petition. According to the appellant, the order dated 5.10.1999 (Annex.P/2) was based on the declaration dated 16.12.1998 made by the appellant-assessee under Rule 3(1) of the Rules of 1998 However, the revenue challenged the order dated 30.7.2003 in appeal before the appellate authority. On receipt of the notice from the appellate tribunal, the appellant submitted cross-objection and prayed for confirmation of the order dated 30.7.2003 on the ground that in view of the subsequent decisions in another case, different view was taken by the Larger Bench of Tribunal than the view taken in appellant's case as back as on 5.10.1999 holding that inclusion of galleries in calculating excise duty is wrong and illegal, therefore, the order dated 30.7.2003 be confirmed by which the demand raised by the demand notice dated 3.11.2000 was dropped by the respondent no.3- adjudicating authority. The appeal of the department was allowed by the appellate authority vide order dated 7.10.2004/30.9.2004 and it has been held that the appellant's challenge to the order dated 5.10.1999 5 failed with the withdrawal of his writ petition from the High Court on 3rd July, 2002 and thereby the order dated 5.10.1999 attained the finality. Therefore, the liability determined finally could not have fulfilled and recovery could not be dropped while execution jurisdiction under Section 11A of the Act of 1944. The copy of this order passed by the appellate authority is Ex.P/9.
The appellant challenged the appellate order dated 7.10.2004/30.9.2004 before the tribunal. The tribunal dismissed the appeal of the appellant vide order dated 24.8.2010. Therefore, the appellant is substantially aggrieved against the orders dated 7.10.2004/30.9.2004 (Annex.P/9) and 24.8.2010.
Learned counsel for the appellant vehemently submitted that in identical controversy in relation to the including of galleries while determining excise duty, the matter came up before Hon'ble Supreme Court in the case of CCE, Jaipur-II Vs. SPBL Ltd. reported in 2000(146) ELT 254 wherein it has been held that while determining the annual capacity and duty liability, the galleries attached to the Hot Air Chamber cannot be taken into account and in view of the decision of the Hon'ble Apex Court even when the appellant withdrawn his writ petition to challenge the order dated 5.10.1999 and once the department itself while deciding the demand-cum-show cause notice vide order dated 30.7.2003 accepted the law laid down by the Hon'ble 6 Apex Court in SPBL case then the appellate authority as well as the tribunal erred in reversing the order passed by the adjudicating authority dated 30.7.2003.
Learned counsel for the appellant vehemently submitted that in fact, the order dated 5.10.1999 merged into order dated 30.7.2003 and also submitted that in fact, the order dated 30.7.2003 is the original order and, therefore, the appellant was not required to challenge the order dated 5.10.1999 whereby a liability has been created against the appellant. Learned counsel for the appellant was emphatic in saying that the order dated 5.10.1999 merged into the order dated 30.7.2003 and the appellant has specifically sought this relief of declaration that order dated 5.10.1999 merged into order dated 30.7.2003.
We considered the submissions of learned counsel for the appellant and perused the record.
It is not in dispute that appellant's liability was determined by the order dated 5.10.1999 passed by the Commissioner, Central Excise, Jaipur-II (Ex.P/2) exercising powers under Rule 3 of the Rules of 1998. These Rules are framed under Central Excise Act, 1944. Rules of 1998 have been framed to provide for determination of annual capacity of certain goods and are applicable to appellant's goods. According to the appellant himself the order dated 5.10.1999 was passed on the basis of the declaration dated 16.12.1998 submitted by the appellant before the assessing 7 authority and said order was challenged by filing DBCWP No.3080/1999 before this Court. This petition was withdrawn on 3rd July, 2002 only to challenge the order dated 5.10.1999 before the CEGAT. Admittedly, the order dated 5.10.1999 has not been challenged either before the CEGAT or before any competent authority till today and, therefore, the final order creating liability of the appellant is the order dated 5.10.1999. Further, it is not the case of the appellant that the order dated 5.10.1999 was provisional or interim order.
To examine the contention of the appellant that said order dated 5.10.1999 merged in the order passed by the respondent no.3 dated 30.7.2003, we may look into the demand-cum-show cause notice dated 3.11.2000 (Ex.P/3). This notice is only a demand notice for recovery of the amount mentioned as well as notice to show cause why said amount cannot be recovered during pendency of writ petition filed by the appellant to challenge the order dated 5.10.1999 which is apparent from the order dated 30.7.2003 passed by the Asstt. Commissioner, Income Tax wherein it has been observed by the Asstt. Commissioner, Income Tax that "....Thus, it appears that duty to the extent of Rs.1,14,000/- is recoverable from the assessee under Section 11A of Central Excise Act, 1944 subject to final decision of the Hon'ble Raj. High Court at Jodhpur in CWP No.3080/99 filed by them..." By no stretch of 8 imagination the proceeding taken under Section 11A of the Act of 1944 to recover the amount already determined by the order of competent authority can be equated with proceeding for reopening of decided matter or proceeding to review the final order. In the facts of this case, the proceedings under Section 11A of the Act of 1944 were only executing proceeding whereunder orders were sought to be executed only.
Since in the facts of this case, demand-cum-show cause notice dated 3.11.2000 was not the initiation of any new proceedings nor the proceedings wherein there could have been any challenge to the order dated 5.10.1999 culmination to which could have resulted into merger of order dated 5.10.1999 in the proceedings initiated by demand-cum-show cause notice dated 3.11.2000. In fact, there was no basis and reason for taking the plea by the appellant that order dated 5.10.1999 creating liability of the appellant could have merged in any order passed in proceeding initiated by demand-cum-show cause notice dated 3.11.2000 wherein only it has been asked to the appellant to show cause as to why the amount as determined in the light of the order dated 5.10.1999 and where substantial amount of the duty liability has been paid by the appellant to the tune of Rs.21,91,500/- against the duty liability of Rs.22,22,000/- per month on the basis of annual production capacity of Rs.2081.472 lacs. The 9 demand-cum-show cause notice dated 3.11.2000 (Ex.P/3) clearly says that after payment of Rs.22,20,000/-, the balance amount remained due in appellant is Rs.1,14,000/- and, therefore, it is sought to be recovered. At the cost of repetition, We may observe that demand-cum-show cause notice in question is neither any notice for re-opening of the case decided vide order dated 5.10.1999 nor it was a original proceeding. In fact, vide notice dated 3.11.2000 (Ex.P/3) only execution proceedings were initiated.
The doctrine of merger has been discussed in detail by the Hon'ble Supreme Court in the case of Kunhayammed & Ors Vs. State of Kerala & Anr. reported in (2000) 6 SCC 359 and the Hon'ble Supreme Court sum-up the conclusion in para no.44 of the judgment and for our purpose, sub-paras nos. (i) and (iii) are relevant and the same are as under: -
"44. To sum up, our conclusions are:
(i)Where an appeal or revision is provided against an order passed by a court, tribunal or any other authority before superior forum and such superior forum modifies, reverses or affirms the decision put in issuance before it, the decision by the subordinate forum merges in the decision by the superior forum and it is the latter which subsists, remains operative and is capable of enforcement in the eye of law.
(ii)**** **** **** **** ****
(iii)The doctrine of merger is not a doctrine of universal or unlimited application. It will depend on the nature of jurisdiction exercised by the superior forum and the content or subject-matter of challenge laid or capable of being laid shall be determinative of the applicability of merger. The superior jurisdiction should be capable of reversing, modifying or affirming the order put in issue 10 before it. Under Article 136 of the Constitution the Supreme Court may reverse, modify or affirm the judgment-decree or order appealed against while exercising its appellate jurisdiction and not while exercising the discretionary jurisdiction disposing of petition for special leave to appeal. The doctrine of merger can therefore be applied to the former and not to the later.
(iv)**** **** **** **** ****
(v)**** **** **** **** ****
(vi)**** **** **** **** ****
(vii)**** **** **** **** ****"
In view of the law laid down by the Hon'ble Supreme Court in the case of Kunhayammed & Ors (supra), the arguments advanced by learned counsel for the appellant is totally mis-placed argument when it has been submitted that the basic order dated 5.10.1999 merged into order passed in execution proceedings initially under Section 11A of the Act of 1944. It may be true that Section 11A of the Act of 1944 provides that when any duty of excise has not been levied or paid or has been short-levied or short-paid or erroneously refunded, whether or not such non-levy or non-
payment, short-levy or short payment or erroneous refund, as the case may be, was on the basis of any approval, acceptance or assessment relating to the rate of duty on or valuation of excisable goods under any other provisions of the Act of 1994 or the rules made thereunder. Then the Officer within one year from the relevant date, serve notice upon the concerned person and require him to show cause why he should not pay the amount specified in the notice, but at the same time, in the light of the decision of the 11 Hon'ble Supreme Court in the case of Kunhaylyammed (supra) what is relevant is the nature of proceeding which determines the issue whether earlier order has merged in subsequent order or not. This has been clearly given out in sub-para no.(iii) of para no.44 of the judgment and in the facts of the case it is clear that the notice too was issued under Section 11A by the concerned authority to the appellant but said authority sought recovery of the amount not paid by the appellant in pursuance of order dated 5.10.1999 and not demanded more than that. In this proceeding, the appellant could have at the most submitted that he has paid the entire duty and could have raised the objection about the quantification of the amount of liability of the appellant, but strictly under order 5.10.1999.
It is settled law that in execution proceedings, the executing court/authority cannot go behind the order and has no jurisdiction to reopen the issues already decided in final order and pass any order, which may result into nullifying the main order or adversely affecting the order sought to be executed, therefore, the authority in the facts of this case, had no jurisdiction to declare that the appellant was not liable to the excise duty as levied by order dated 5.10.1999.
It is settled law that a decision given between the parties and which attained finality, remains final even if in another case, different view is taken by the court on 12 question of law and, therefore, the respondent no.3 - the Dy. Commissioner, Central Excise Division, Chittorgarh had no jurisdiction to reopen the issue decided in final order while executing the final order.
In view of the above reasons the learned appellate tribunal rightly held that appellant was wrong in contending that appellant withdrew his writ petition no.3080/1999 in view of the decision of the Hon'ble Apex Court delivered in the case of SPBL. The appellant's writ petition was dismissed as withdrawn on 3rd July, 2002 and the Hon'ble Apex Court delivered the judgment in the case of SPBL on 17.9.2002. The learned tribunal also carefully took note of the fact that exclusion of galleries has been confined only in specified cases i.e., where the gallery has no fans or radiators attached to it. In cases where the gallery having some other equipment or utilization for the entire process of heating, setting or drying of fabrics was not the subject matter of the decision and that has been clarified by the Bombay High Court in Om Textile Ltd Vs. CCE, Belapur Navi Mumbai reported in 2006 (74) RLT 233 (Bom.) wherein it has been held that law laid down by the Hon'ble Supreme Court is only that gallery having no fan or radiator attached to it cannot be taken into consideration while determining the number of chambers. Therefore, before excluding the gallery, it will be necessary to ascertain the fact situation and thereupon arrive at the correct findings. Such an 13 exercise is not permissible in execution proceedings.
In view of the above reasons we are of the view that order dated 5.10.1999 was the original order and has not merged in the order dated 30.7.2003 which was passed in execution proceedings seeking to execute the order dated 5.10.1999 and the appellate authority and the tribunal rightly set aside the order dated 30.7.2003 and dismissed the appeal of the appellant.
In view of the above discussion, this appeal is dismissed being devoid of merit. No order as to costs.
[PRAKASH TATIA], J. [ARUN MISHRA], CJ. cpgoyal/-